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Disputes Matter – November 2015

Disputes Matter – November 2015

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Contract Interpretation: It’s all in the drafting

In the last edition of Disputes Matter we reported on the Supreme Court’s clarification of […]

In the last edition of Disputes Matter we reported on the Supreme Court’s clarification of the correct approach to contract interpretation [1]. That approach has now been applied by the Commercial Court in Laird Resources LLP v Aumm Holdings & Ors [2], this time in the context of a commercial settlement agreement.

The claimant had provided long-running assistance to the defendants in the management of their real estate portfolio, including the creation of a trust to assist with the portfolio’s financing. He also held a one-third interest in the portfolio. When the relationship between the parties broke down, the matter was resolved by means of a deed of settlement and a parting of ways. Clause 2 of the settlement deed provided that capital receipts generated by the portfolio were to be paid into the trust and clause 2.9 provided that, in consideration of the claimant terminating his ongoing interest in the portfolio, the sum of £650,000 plus VAT was to be paid to him “notwithstanding whether… any sums as referred to… above [i.e. the capital receipts] has or have been received… by no later than 31 December 2014”. The settlement sum was not paid and the claimant issued these proceedings.

The claimant submitted that clause 2.9 imposed an unconditional obligation on the defendants to make the requisite payment, whereas the defendants argued that the obligation was contingent or conditional upon capital receipts having been paid into the trust.

Applying Arnold v Britton [3], the Commercial Court found that, although the relevant term of the settlement deed was a tough one for the defendants to have agreed to, as it imposed on them an obligation to pay the claimant even if they had not received trust monies with which to fund it, nevertheless it did impose that obligation – the wording of the contract was clear and its ordinary meaning could not be avoided.

WM Comment

Recent case law could not be more clear that the wording of a contract itself, and the ordinary meaning of that wording where that is plain and unambiguous, is paramount. Commercial common sense cannot be relied upon as a legal argument to undermine the obvious and natural meaning of contract drafting just because a bargain turns out to be bad for any party.

It’s all in the drafting. More than ever before, it is of vital importance that commercial parties make sure that their contracts say, and mean, exactly what they are meant to.

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[1] https://www.walkermorris.co.uk/contract-king-says-supreme-court
[2] [2015] EWHC 2615 (Comm)
[3] [2015] UKSC 36

Early Neutral Evaluation

Early Neutral Evaluation (ENE) is a form of Alternative Dispute Resolution (ADR) whereby parties to […]

Early Neutral Evaluation (ENE) is a form of Alternative Dispute Resolution (ADR) whereby parties to a dispute appoint an independent person, perhaps a judge or another third party, often with expertise in the relevant discipline, to provide a non-binding opinion which evaluates the facts, evidence and law in dispute. The opinion helps the parties to understand and appreciate the strengths and weaknesses in their case and that assessment, in turn, helps the parties to negotiate a settlement. The process is usually non-binding and without prejudice and can combine the privacy and flexibility of negotiation with the assistance of an independent, and potentially an expert, evaluator.

ENE was pioneered in the US in the late 1980s, but it has, so far, been relatively under-used within England and Wales – particularly outside the Commercial and Technology and Construction courts. One reason for this might be a lack of clarity as to whether the process requires party consent and/or whether it can be ordered by the court; another might simply be a lack of general awareness and therefore an under-appreciation of its merits.

In a recent case, Seals v Williams [1], the High Court considered the question of the court’s power to direct ENE. Norris J referred to the court’s wide case management powers under rule 3.1 (2) (m) of the Civil Procedure Rules (CPR) and concluded that those powers allowed the court to order ENE. The judge also considered that for a judge to conduct ENE is part of the judicial function and does not depend upon party consent.

In 2013 the Chancery Modernisation Review Final Report recommended the development of judge-led ENE in Chancery proceedings and, as of 1 October 2015, Norris’ J’s views expressed in Seal have been codified into CPR 3.1 (2) (m) so that the rule, which is of general application to all civil proceedings, now specifically refers to the court’s ability to order ENE.

ADR can assist with the effective and efficient resolution of disputes. With its combination of privacy, flexibility and third party assistance, ENE (judge-led or otherwise) is likely to prove an increasingly popular and valuable tool for parties wishing to resolve their disputes without having to resort to or progress litigation. Please speak to any member of Walker Morris’ Commercial Dispute Resolution team if you would like any further information.

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[1] [2015] EWHC 1829 (Ch)

When to seek summary judgment

It will be possible, in certain circumstances, to deal with cases without the need for […]

It will be possible, in certain circumstances, to deal with cases without the need for parties to incur the time, cost and potential publicity involved in full-blown litigation. Where a case is suitable for disposal by summary judgment, a judicial decision to finally resolve the case is made early and in a simple hearing, as opposed to in a trial involving detailed disclosure and adversarial examination of evidence.

Civil Procedure Rule (CPR) 24.2 states that summary judgment may be awarded against a claimant or defendant on the whole of a claim or on a particular issue if the court considers that the party has no real prospect of success and there is no other compelling reason why the matter should be dealt with at trial. Two recent cases, Optaglio v Tethal and Royal Mail v Maples Teesdale [1] together provide a helpful reminder of the circumstances in which summary judgment can be obtained.

When considering whether to seek summary judgment, the following principles apply.

A summary judgment hearing is not the appropriate forum to resolve complex disputes of law or fact – it is only suitable for clear and obvious cases.
In applying the CPR 24.2 test, the court must consider whether the claimant or defendant has a realistic (as opposed to a fanciful) prospect of success. In this context, ‘realistic’ means ‘with some degree of conviction’ or ‘more than merely arguable’.
On a summary judgment application the court must not conduct a ‘mini-trial’ without the benefit of disclosure and cross-examination of evidence, but it must undertake some investigation and analysis of the law and evidence before it, to reach a proper conclusion.
Where the court is satisfied that it has the necessary law and evidence to reach a conclusion – including deciding short points of law or construction – it should do so. Where a party’s case is wrong in law, the sooner it is stopped, the better.
Where there is credible contemporaneous material which contradicts a party’s evidence or assertion, a judge may give summary judgment on the basis that the evidence or assertion is not to be believed. However it is incumbent on the judge to explain and justify, with reasonable particularity and reference to the contemporaneous material, that decision.
The need for further investigation to be carried out can constitute a ‘compelling’ reason for the matter to be heard at trial. Another ‘compelling reason’ might be where legal authority relied upon in a summary judgment hearing is actually the subject of an appeal. Where there are serious allegations, such as to fraud, dishonesty or bad faith, that of itself is not necessarily a ‘compelling’ reason to hold a full trial, but it might be depending on the facts of the particular case.
CPR Practice Direction 24 clarifies that, on any summary judgment application, the court may give judgment on the claim for either party; it may strike out or dismiss the claim; it may dismiss the summary judgment application itself; or it may make a conditional order. A conditional order can involve either party making a payment into court or giving security for costs, or it can require a party to take a specific step, failing which that party’s case will be dismissed or struck out. Conditional orders may be made where it is possible but unlikely that a case will succeed and so the CPR 24.2 test is met, but only just.

WM Comment

Parties with a particularly strong legal or evidential case, or those facing a spurious or misconceived claim, should seek early advice as to whether summary judgment would be available to quickly and cost-effectively dispose of the dispute. In Optaglio the Court of Appeal reiterated that the summary judgment test is a high threshold, but the possibility it affords for early and private determination of a dispute means that it can also be a highly valuable tool that bears careful consideration in many cases.

For further information and advice, please contact any member of Walker Morris’ Commercial Dispute Resolution team.

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[1] Optaglio Limited v Tethal & Anor [2015] EWCA Civ 1002; Royal Mail Estates Limited v Maples Teesdale & Anor Ch D 14/10/2015

Limitation rules

The background facts to both Arcadia v Visa [1] and WH Newson v IMI [2] […]

The background facts to both Arcadia v Visa [1] and WH Newson v IMI [2] involve allegations of competition law infringements, but arguments raised by defendants in both cases are of general application. The cases therefore serve as up-to-date examples of some of the tactics that defendants can deploy to avoid or limit liability.

Limitation

In Arcadia, in 2013 the claimant (a group of high street retailers) issued a claim for damages against Visa, alleging that card fees set by Visa dating back to 1997 were in breach of competition laws. In accordance with the limitation period for tort-based claims as per section 2 of the Limitation Act 1980 (the LA), Visa applied for strike out or summary judgment in respect of those parts of the claim that alleged infringements prior to 2007, on the basis that that was more than six years before issue of proceedings. However the retailers sought to rely on section 32 (1) (b) of the LA, claiming that Visa had deliberately concealed facts relevant to the action. Section 32 (1) (b) provides that where any fact relevant to the claimant’s right of action has been deliberately concealed by the defendant, the limitation period does not start to run until the claimant discovered, or could with reasonable diligence have discovered, the concealment.

First the High Court and then Court of Appeal had to decide what is a “fact relevant to the claimant’s right of action”? The retailers argued that, essentially, this meant all facts necessary and sufficient to enable the claimant to come to an informed view about the prospects of success of a claim, but the courts disagreed, confirming:

Section 32 (1) (b) must be construed narrowly.
There is a distinction to be drawn between facts which found the cause of action and facts which merely go to prospects of success or are broadly relevant to a claimant’s case.
Section 32 (1) (b), and the delayed limitation period, therefore only arises where there is deliberate concealment of fundamental facts which the claimant has to prove to establish a prima facie case.

The Court of Appeal also rejected the retailers’ argument that the domestic law of limitation contravenes EU principles of effectiveness and full compensation.

Contribution

In WH Newson there had been a European Commission finding, in 2006, that a cartel (of which IMI formed part) had unlawfully fixed prices and committed other competition law infringements during a period ending in 2004. The claimant issued proceedings against IMI for follow-on damages in 2012, relying on section 32 (1) (b) LA. The claimant argued that IMI and others in the cartel had deliberately concealed the cartel and the competition infringements, such that the earliest time the concealment could have been discovered was when the Commission decision was announced in 2006. IMI settled with the claimant and then pursued a contribution claim against another cartel member.

Sections 1 (1) and 1 (4) of the Civil Liability (Contribution) Act 1978 (the CL(C)A) together provide that a person liable for damage or a person who has settled but would have been found liable if the claim against him had been established may recover a contribution from another person liable for the same damage.

The other cartel member resisted the contribution claim arguing, in accordance with Part 20 of the Civil Procedure Rules (CPR), that IMI had had a “collateral defence” (the limitation defence) – that is, a defence where the burden would have fallen on IMI.

The High Court noted, however, that the claimant would have had to have shown that it could not reasonably have found out about the cartel infringements prior to 2006. The burden of succeeding on the limitation point would not, therefore, have fallen on IMI and there was no valid CPR 20 collateral defence argument on which the cartel member could rely to avoid contribution liability.

WM Comment

The Arcadia and WH Newson cases have complex competition factual contexts and each explore only a fairly specific limitation/contribution question. However both cases are a good reminder of the wider laws of limitation and contribution, which can represent important tactics for defendants who might be able to avoid liability altogether, or who might be able to mitigate their losses by involving other liable parties. Both cases also provide helpful worked examples of the circumstances in which a deliberate concealment of facts may delay commencement of a limitation period; and WH Newson provides High Court guidance as to how a Part 20 collateral defence might be established.

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[1] Arcadia Group Brands Ltd & Ors v Vica Inc & Ors [2015] EWCA Civ 883
[2] WH Newson Holding Ltd & Ors v IMI Plc and Anor [2015] EWHC 1676 (Ch)
[3] The level of knowledge will be a question of fact in each case

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Gwendoline Davies - Partner, Commercial Dispute Resolution at Walker Morris LLP square

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Malcolm Simpson, Managing Partner, Litigation & Dispute Resolution at Walker Morris LLP square

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